Can General Motors, America’s traditional automotive giant, leverage the 3 Laws of Hacker Culture to survive in today’s market?
General Motors (further referenced to as GM) is a multinational car manufacturer based in the US automotive capital of Detroit, Michigan. The company designs, manufactures and sells cars, trucks, commercial vehicles, crossovers and automobile parts. Despite the highly competitive market conditions and revolutionary leaps in automotive innovation from companies such as Tesla, GM remains the second largest car manufacturer in the world. With their primary markets in the US and China, the company retains a strong brand portfolio and sells its vehicles under several subsidiary brands such as Chevrolet, Cadillac and Opel, all of which monopolize a sizable share of the consumer market. Over the past year, GM have executed a huge strategic move towards autonomous vehicles with the acquisition of Cruise Automation, a San Francisco-based startup which turns regular vehicles into self-driving ones through high-tech sensor technology.
Recent reports from the Federal Communications Commission reveal that via the collaboration with Cruise Automation, GM is aiming to expand its fleet of autonomous vehicles in San Francisco, Detroit and Arizona– suggesting that GM is very aware of how necessary technological innovation it is for their survival against new-founded giants such as Tesla.
Usually, companies working in the field of autonomous driving aim to achieve the highest number of miles driven, a concept that has become a standard measure of quality.
However, as GM’s CEO argues “it’s not as much about the miles as it is about the experiences that the car learns”.
The company underwent another strategic move for FY16 when they invested $500 million in Lyft Inc. It has been established that GM are laying out plans to develop their own on-demand network of self-driving cars in order to tap into the highly lucrative ride-sharing economy, which is currently being monopolized by Uber. They are playing a very serious hand: their investment counted for an entire half of Lyft’s funding round. It is by far one of General Motor’s largest investments in another company, clearly reinforcing their intent to remain not only relevant, but dominant, in today’s market. Ultimately, they are arming themselves to make the huge transition from century-old practices into high-tech and digital. With GM as a leading example, it is becoming increasingly evident that the 3 Laws of Hacker culture can be applied and leveraged by older, more traditional companies– and already have been. How far the company will travel with this strategy depends on a plethora of varying factors, such as regulation and how they handle the transition. One thing is for certain, however: remaining to operate with older attitudes, traditions, technology and even internal infrastructures will fail to move GM– or any company– forward. In fact, it will lead to their total demise.
Moore’s law and Cruise Automation
“Cruise Automation creates autonomous driving technology to build a safer and more efficient world”, reads the start-up’s company slogan. But when addressing the subject of autonomous driving, the first and most obvious layer of the ecosystem is the physical vehicle itself. The capital investment and manufacturing expertise required to produce vehicles at scale largely prevents early-stage companies from entering the race easily, if at all. Even large, deep-pocketed technology companies investing heavily in an autonomous future, such as Google and Uber, seem unwilling and unlikely to become car manufacturers themselves. So how do you simultaneously combine the technology required to produce an AV whilst scaling production? The most prevalent solution currently seems to rely on the continuation of traditional manufacturers to mass-produce vehicles, even in the autonomous age. Traditional automotive manufacturers cannot sufficiently leverage Moore’s Law unless, as in the case of GM, they acquire the technology on top of their mass-production and combine it with their already-established lines of business. As value-creation in transportation shifts toward high-tech components and software, manufacturers of the vehicles themselves may become increasingly commoditized, so a move towards digital seems inevitable (and certainly necessary) for longer-term survival. As a result, virtually every traditional car manufacturer has begun to invest in autonomous vehicle capabilities to some degree. Aside from the obvious AV category king Tesla (who are in fact primarily considered a battery company), Volvo, Daimler and BMW are developing particularly interesting autonomous programs.
Acquired by GM in 2016, Cruise Automation initially started with the idea to transform autonomous driving on the highways of San Francisco. It devised a system to retrofit any car with a partial autonomy kit (level 2 or 3). However, with the growing interest in AI and SV cars, the company changed focus a year prior to their acquisition, in the direction of building software for fully self-autonomous vehicles. Though the technology behind Cruise Automation is not explicitly known, Hackerbay asserts that it is a system of censors that can be integrated in almost any vehicle on the road in order to transform them into AVs, and thanks to Moore’s Law, we are certainly set to see further improvements in this field (potentially in the form of smaller yet more sophisticated censors). Since being taken on by GM, Cruise Automation has been quietly refining its technological capacity and outreach in preparation for an expected integration with Lyft in 2017. Cruise Automation has already received a permit to test its self-driving vehicles in California, so we should expect to see GM’s autonomous Chevrolets on the road very soon. Cruise Automation’s technology seems to be rapidly maturing, and with successful cohesion between the three entities, GM’s investment in Lyft will be more than prolific. The auto manufacturer invested $500 million in Lyft, on top of an agreement to lease its electric Chevrolets to Lyft drivers. This move is a clear indication that GM is not rushing to release any self-driving vehicle soon, but rather testing every aspect before making a decision– implying their long term goal of being a serious competitor to the Tesla’s of today’s market. It is only a matter of time until all the pieces of GM’s mobility puzzle fall into place, but whether passengers will be summoning self-driving cars using the Cruise or Lyft app remains to be seen.
Furthermore, it is important to note that Cruise Automation operates as an independent subsidiary of GM. This allows the creative startup environment to remain, promoting speed, experimentation and rapid-fire iterations on their technology. It is well known that big corporations today are slow in making decisions and highly risk averse– an attitude directly inverse to that of Silicon Valley. All signs point to the idea that these fast-paced, dynamic Valley entities are getting something right, seeing as they are consistently dominating the market in all industries and product categories. General Motor’s decision to retain Cruise Autonation’s start-up component and attitude is a sign that they are ready to embrace risk in preparation for battle with the tech giants of Silicon Valley.
Lyft and Metcalfe’s Law
Lyft is ‘the other’ on-demand transportation service platform enabling people to hail a cab with a simple tap of their smartphone. Lyft’s business model is similar to that of Uber, hence their pigeonholed status of ‘the other’ ride-hailing service. However, they are valued at $5.5 billion with a presence in 200 American cities alone– they are certainly not giving Uber an easy ride. Their aim remains to become the primary dominant ride-hailing company in America. Metcalfe’s Law states that aggregate network value is proportional to the square of the network size, implying that the individual user’s utility is a linear function of network size. In the case of Lyft (and Uber), each connected car (in other words, the smartphone + car formula) makes the whole system more informed, faster at executing and more accurate in their services, all thanks to big data analytics and AI technology.
Since GM does not have any network effects present from its own traditional product offerings, the decision to invest in Lyft is unsurprising if they are serious about remaining competitive in the long-term. It is the obvious choice if they are truly devoted to developing and testing a fully autonomous vehicle in the next few years, and ultimately totally evolving as a company. Leveraging Lyft’s network effects through its own fleet of Chevrolets is a very smart move, as for a fraction of the investment required to build such network, GM can take full advantage of Lyft’s existing network effects. As both GM and Lyft already hold massive influence in the American automotive market, the effect could be exponential if executed correctly– especially when taking into consideration Google’s lawsuit against Uber (a move that may leave Uber way behind the competition) amongst the other regulation issues they have racked up in recent months. With the circumstances in their favour and a correct leveraging of network effects, Lyft and GM could together dominate the American AV market with ease.
General Motors and The Power Law
General Motors has the largest market share in the US automotive market ahead of Ford Motors, Toyota and Fiat Chrysler. Last year, the company ranked 3rd amongst the largest global automakers, determined by vehicle volume, in the world. General Motors might not be the category king when it comes to auto-manufacturers, but it surely retains prestigious status as an American behemoth and industry benchmark. Further, it certainly holds the potential to become the category king for mass-produced, autonomous EVs (in the case that Tesla does not manage to complete Musk’s ambitious vision within the next 5 years). Regardless, the strategic combination of Cruise Automation and Lyft will definitely propel the company beyond other giants such as Volvo, BMW or Volkswagen. We are yet to see how GM will execute its strategy, and then if the market is willing to adopt it, but leveraging the 3 fundamental Laws that drive Silicon Valley’s growth can only be a great step in the right direction.
Conclusion
The autonomous driving landscape is fluid and ever-changing in these early days of technological innovation, especially as established auto manufacturers, large technology companies and scrappy, fearless start-ups are all relentlessly competing for a piece of the action. A wave of M&A activity, partnerships and consolidation seems likely as autonomous vehicles move toward mass-market and commercial availability. Huge amounts of capital are being poured into various tech companies developing this AV technology as we speak, but who will come to reign as category king remains to be seen. If one thing is for certain in this highly variable market, there will be massive opportunity for profit as the autonomous vehicle market takes off in the coming years.
In the words of angel investor Tikhon Bernstam,
“you’d be hard-pressed to lose money investing in this space right now because there is going to be tens or even hundreds of billions in M&A and IPOs going forward”
With their strategy and resources ready for deployment, here’s to seeing what General Motors can come up with next, and whether their leveraging of the 3 Hacker Laws will help them remain an automotive giants in not only America, but the world.
